When applying the lower of cost or market rule, how much should Renoir, Inc.'s inventory be written down if the cost is $1,000 and the market value is $1,400?

The lower of cost or market rule is an accounting principle used to value inventory, ensuring that the inventory is reported at the lower of its historical cost or its current market value. In this case, Renoir, Inc. has an inventory cost of $1,000 and a market value of $1,400.

According to the rule, the company must compare these two figures. The historical cost, which is $1,000, is lower than the market value of $1,400. Therefore, the inventory should be reported at its cost of $1,000 without any write-down necessary since the market value exceeds this cost. As such, there is no need to adjust the inventory value downward, resulting in a write-down amount of zero. This aligns with the intent of the rule, which is to prevent overstating the value of inventory on the financial statements.